By Sara Sjolin
LONDON (MarketWatch) ? Shares of luxury-goods firms rallied Tuesday as Swatch Group AG reported better-than-expected sales and trade data from China reassured investors about the nation?s economic outlook.
Swatch Group AG /quotes/zigman/281516 CH:UHR +2.91% ?surprised investors with a 21.4% sales increase in 2011, which was above consensus expectations of 20%.
The watch maker reported gross sales of 7.14 billion Swiss francs ($7.51 billion) for 2011 ? the first time ever the firm exceeded the CHF7 billion milestone. The stock jumped 2.9% on the news in Zurich trade.
The positive sales and stock move inspired shares of other luxury brands. Shares of LVMH Moet Hennessy Louis Vuitton /quotes/zigman/165830 IT:LVMH +4.16% ?rose 4.7%, while Christian Dior S.A. /quotes/zigman/164593 FR:CDI +4.34% ?moved 4.3% higher. Tod?s SpA /quotes/zigman/269428 IT:TOD +5.16% ?advanced 5.2%.
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?The luxury-goods stocks are driven by Swatch, because it is the first company to bring out numbers for the full year,? said Rene Weber, an analyst at Vontobel Equity Research.
Swatch?s sales from the second half of 2011 came in slightly lower than the 23.7% growth in the first six months of the year, but people had expected much more of a slowdown, according to Weber.
Another luxury retailer, Tiffany & Co. /quotes/zigman/243577/quotes/nls/tif TIF -10.80% ,?was also in the spotlight Tuesday. The fine jewelry company said its holiday sales were hit by ?restrained spending? and lowered its earnings forecast for 2012. Read more about Tiffany.
?Tiffany?s was below expectations, but not bad,? Weber said. ?We still believe we will see high single-digit growth in the sector, but it depends on China. We were afraid of a collapse in the Chinese economy, but now we don?t see that.?
Chinese consumers are extremely important to future growth for luxury retailers and trade data from China released Tuesday convinced investors that the large consumer economy will face a soft landing, rather than a hard landing. A housing-market bubble, alongside concerns about rising non-performing loans and fears of a shadow banking system, have been stoking worries that the world?s second largest economy was likely to hit the buffers in 2012. But Chinese policy makers gave investors hope that the economy will manage strong growth in 2012, which ?will continue to provide a helpful backdrop for luxury retailers,? according to William Hobbs, head of equity strategy for Barclays Wealth.
?The positive slam on luxury goods has been related to Chinese growth and the growth may go on for a number of years yet,? Hobbs said. ?The authorities have a stated aim of trying to rebalance the economy away from exports towards greater reliance on consumption.?
He further pointed to the American market for luxury goods as a major revenue source for retailers in the future. Economic data from the U.S. have been encouraging in recent weeks, with the unemployment rate falling to 8.5%. ?Confidence is growing in the U.S. economy with employment data starting to gather momentum,? Hobbs said.
Also, luxury goods will appeal to a broader range of the American consumer market, ?where traditionally such brands have appealed solely to the super affluent,? he said.
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